Retirement, here and abroad

France is considering raising the retirement age to help control a pension deficit. Of course, that nation is hardly alone in addressing the challenges of underfunded retirement plans.

Here in the United States, it's a little hard to feel sorry for the French workers who learned this week that their government wants to raise the minimum retirement age from 60 to 62 to save money on pension payments. That still sounds pretty good to most Americans, for whom retirement increasingly looks like a luxury they won't be able to at afford at any age. Before we engage in too much schadenfreude, though, it's worth remembering that expectations are relative. French workers are no different from any others in wanting to protect the benefits they have long enjoyed. Rather than hope that French retirees face the same fate as our own, we should look at home and abroad for fair and fiscally responsible solutions to ballooning deficits that also preserve a social safety net.

The causes of underfunded pensions are similar throughout the developed world. Populations are living longer and pension costs have soared, while in many countries low birthrates have meant fewer people paying into the system. The global economic crisis has cut into employment, further reducing contributions into U.S. Social Security and French government pension funds. But American retirees have suffered an added whammy. While French pensions are fully funded through the government, U.S. workers rely as much on private funds as on Social Security, and Americans' retirement funds and 401ks have been hammered.

The French retirement system has been based on the belief that people should get to enjoy their lives after 40-odd years of work, whereas the U.S. approach has been to provide some support for people after they are no longer able to work. Neither system appears to be sustainable at current levels, prompting national and state governments in both countries to consider a variety of options, including raising the age at which benefits kick in. This seems reasonable; it's one thing to retire in your early 60s and collect a pension when life expectancy is in the mid-70s (as it used to be), and quite another when people are living well into their 80s and 90s.

French officials project a pension deficit of nearly $40 billion this year. By gradually raising the retirement age over eight years and imposing a 1% tax hike on high earners, they say they can balance the books. But many economists say that is not likely to be sufficient. Unions are pressing for corporations to pay more. In the U.S., meanwhile, lawmakers are looking at options for shoring up public pension funds and other retirement programs: hiking worker contributions, providing lower benefits for new hires, reducing aid for wealthy retirees, cutting cost-of-living adjustments, and pushing employees further into 401ks, whose benefits aren't guaranteed. There are no painless solutions in either country; the trade-off for living longer may well be paying more before kicking back.